2025 (1) TMI 1024 - HC - GST

Seeking grant of regular bail - fraudulent availment of ITC - fraudulent invoices issued by non-existent suppliers - cancellation of GST registration - HELD THAT - Investigation is completed by the department and commencement of trial will take its own time. The offence is punishable upto 5 years only and based on the documentary evidence. An undertaking has been filed on behalf of Director of M/s Nandeshwari Steel Co. wherein stating that he will pay GST amount of Rs.2.00 crores and the same shall be paid in two monthly installments of 1.00 crore each. The first installment would be paid at the end of January 2025 and second installment would be paid in the month of February i.e. on or before 28.02.2025 failing which non-bailable warrant can be issued against the present applicant to show his bona fide. This Court has also taken into consideration the law laid down by the Hon ble Apex Court in the case of SANJAY CHANDRA VERSUS CBI 2011 (11) TMI 537 - SUPREME COURT as well as in the case of GUDIKANTI NARASIMHULU AND ORS. VERSUS PUBLIC PROSECUTOR HIGH COURT OF ANDHRA PRADESH 1977 (12) TMI 143 - SUPREME COURT . Obviously the conclusion of trial will take time and keeping the accused behind the bars is nothing but amounts to pre-trial conviction and therefore considering the celebrated principle of bail jurisprudence is that bail is a rule and jail is exception as well as the concept of personal liberty guaranteed under Article 21 of the Constitution of India present application deserves consideration. Considering the nature of the allegations made against the applicant/s in the FIR without discussing the evidence in detail prima facie this Court is of the opinion that this is a fit case to exercise the discretion and enlarge the applicant/s on successive regular bail. Hence the present application is allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

• Whether the applicant, a director of a company accused of fraudulently availing Input Tax Credit (ITC), is entitled to successive regular bail under the Bharatiya Nyaya Suraksha Sanhita, 2023.
• The legal implications of fraudulent ITC claims under the Central Goods & Service Tax Act, 2017, particularly sections 132(1)(c), 137(1), and 137(2).
• The conditions under which bail can be granted in cases involving economic offenses and the application of the principle that "bail is a rule and jail is an exception."

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to Successive Regular Bail

• Relevant legal framework and precedents: The application for bail was filed under Section 483 of the Bharatiya Nyaya Suraksha Sanhita, 2023. The court also considered precedents set by the Hon'ble Apex Court in Sanjay Chandra vs. Central Bureau of Investigation and Gudikanti Narasimhulu And Ors vs. Public Prosecutor, High Court of Andhra Pradesh, emphasizing the principle that bail is a rule and jail is an exception.
• Court's interpretation and reasoning: The court considered the nature of the offense, the severity of punishment, the likelihood of tampering with evidence, and the applicant's character and behavior. It emphasized the importance of personal liberty under Article 21 of the Constitution of India.
• Key evidence and findings: The investigation revealed fraudulent ITC claims by the company, with the applicant admitting involvement. However, the court noted that the investigation was complete and the trial would take time, with no further evidence required from the applicant.
• Application of law to facts: The court applied the principle of bail jurisprudence, considering the documentary nature of the evidence and the maximum punishment of five years, to justify granting bail.
• Treatment of competing arguments: The prosecution argued against bail due to the gravity of the offense and potential abscondence. The defense highlighted the applicant's cooperation and the undertaking to pay a significant GST amount.
• Conclusions: The court concluded that the applicant was entitled to bail, subject to conditions ensuring cooperation with the trial and preventing misuse of liberty.

Issue 2: Legal Implications of Fraudulent ITC Claims

• Relevant legal framework and precedents: The case involved alleged violations of the CGST Act, 2017, specifically sections 132(1)(c), 137(1), and 137(2), which address fraudulent ITC claims and associated penalties.
• Court's interpretation and reasoning: The court acknowledged the serious nature of the allegations but focused on the procedural aspects of bail rather than delving into the merits of the case.
• Key evidence and findings: The prosecution presented evidence of fraudulent invoices and non-existent suppliers, leading to significant financial loss to the government.
• Application of law to facts: The court recognized the gravity of the offense but balanced it against the principles of bail jurisprudence and personal liberty.
• Treatment of competing arguments: The defense argued that the ITC was availed when supplier registrations were valid, while the prosecution emphasized the fraudulent nature of the transactions.
• Conclusions: The court's decision to grant bail did not imply a judgment on the merits of the fraudulent ITC claims, which would be addressed at trial.

3. SIGNIFICANT HOLDINGS

• Verbatim quotes of crucial legal reasoning: "Considering the celebrated principle of bail jurisprudence is that 'bail is a rule and jail is an exception' as well as the concept of personal liberty guaranteed under Article 21 of the Constitution of India, present application deserves consideration."
• Core principles established: The judgment reinforced the principle that bail should be granted unless there is a strong justification for detention, especially in cases where the trial is likely to be delayed.
• Final determinations on each issue: The court granted successive regular bail to the applicant, subject to conditions including a personal bond, restrictions on travel, and regular reporting to the police station.

The judgment highlights the balance between the severity of economic offenses and the rights of the accused to personal liberty, emphasizing the procedural safeguards in the bail process.